Investment Migration Council, 16 rue Maunoir, 1211 Geneva, Switzerland

investmentmigration.org

1

Organisation in special consultative status with the Economic and Social Council of the United Nations since 2019

European Commission Joint Transparency Register Secretariat ID: 337639131420-09

IMC Response to EESC Opinion on EC report

‘Investor Citizenship and Residence Schemes in the EU’

[COM(2019)12 final]

Press Release

Geneva, 29 October 2019

EU must adopt more inclusive approach to avoid legislative

“echo chamber” says the IMC

The IMC cautions the EU against the risk of a policy hijack by ill-informed and unaccountable third

party organisations ahead of the adoption of a European Economic and Social Committee Opinion on

residence and citizenship by investment.

This Opinion is tabled for adoption at the EESC’s plenary session on 30 and 31 October. The IMC

believes that it has been heavily influenced by third party organisations that have been given full

access to the Committee and have had a significant role in drafting the related documents. What is

particularly concerning is that these third party organisations have little or no specialist understanding

of the standard industrial processes at the heart of investment migration. This can be seen by the

multiple factual errors littered across their previously published work.

In addition, it would appear that these organisations have been given unprecedented privileged access

to the Committee, something denied to the official trade association that represents the majority of

the investment migration industry – a remarkable situation in such a legally and technically complex

industry where it is unlikely that many members of the Committee will have an educated view in

advance of the proceedings. Despite making two formal attempts to engage with the EESC, the IMC was

not invited to meet with the EESC’s study group. This situation creates a fundamental imbalance and

calls into question the neutrality of the entire process.

Investment Migration Council, 16 rue Maunoir, 1211 Geneva, Switzerland

investmentmigration.org

2

Organisation in special consultative status with the Economic and Social Council of the United Nations since 2019

European Commission Joint Transparency Register Secretariat ID: 337639131420-09

The IMC has consistently supported calls from the European institutions for increased transparency and

higher standards across the industry, and take proactive steps to work with policymakers. “The

European policy debate must not be dominated by a limited number of external stakeholders

representing one agenda. Best practice governance requires the voice of all parties to be taken into

account; especially those of industrial experts, which have been sadly lacking thus far. There is still

time to ensure that the voice of an industry which provides millions of euros in FDI and creates

significant and verifiable societal value is given the same courtesy as numerous ill-educated and

unaccountable third parties. We implore the EU to adopt a more inclusive and, perhaps ironically given

the parties involved, a more transparent approach in this process.” said Bruno L’ecuyer, Chief

Executive of the IMC.

Notes to Editor

About the Investment Migration Council

The Investment Migration Council (IMC) is the worldwide association for Investment Migration, bringing

together the leading stakeholders in the field and giving the industry a voice.

The IMC sets the standards on a global level and interacts with other professional associations,

governments and international organisations in relation to investment migration. The IMC helps to

improve public understanding of the issues faced by clients and governments in this area and promotes

education and high professional standards among its members.

The IMC is constituted as a not-for-profit association under Swiss law. Based in Geneva, it has

representative offices in New York, London and the Cayman Islands. Managed by a Secretariat under

the direction of a Governing Board, the IMC also has a non-executive Advisory Committee, in which the

most important industry stakeholders are represented. The IMC is funded by membership fees, donors

and income from activities such as events, education, training, and publications.

Media Contact

Office: +41 22 533 1333

Email: media@investmentmigration.org

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 1/11

EN

European Economic and Social Committee

SOC/618

Investor Citizenship and Residence Schemes in the EU

OPINION

Section for Employment, Social Affairs and Citizenship

Report from the Commission to the European Parliament, the Council, the European Economic

and Social Committee and the Committee of the Regions: Investor Citizenship and Residence

Schemes in the European Union

[COM(2019)12 final]

Rapporteur: Jean-Marc Roirant

Contact soc@eesc.europa.eu

Administrator Annemarie Wiersma

Document date 21/10/2019

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 2/11

Referral Commission, 12/03/2019

Legal basis Article 304 of the Treaty on the Functioning of the European

Union

Section responsible Section for Employment, Social Affairs and Citizenship

Adopted in section 15/10/2019

Adopted at plenary DD/MM/YYYY

Plenary session No …

Outcome of vote

(for/against/abstentions) …/…/…

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 3/11

1. Conclusions and recommendations

1.1 The EESC echoes the European Parliament's call in a recent report1 to phase out all investor

schemes, and urges the Member States to follow this recommendation or provide reasonable

arguments and evidence for not doing so.

1.2 Until this takes effect, the EESC acknowledges that to address the risks posed by citizenship-by-

investment (CBI) and residence-by-investment (RBI) schemes, detailed in chapter 3 below, and

to fulfil its primary mandate, the group of Member States' experts set up by the European

Commission should focus on:

i) minimum standards for due diligence and security checks that are adapted to the risk profile

of CBI and RBI applicants and that comply with existing EU anti-money-laundering rules;

ii) minimum standards for the operational integrity of the scheme, including transparency and

governance measures as well as regulatory measures for the industry in accordance with the

relevant legal framework; and

iii) guidelines and mechanisms for information-sharing between Member States as well as

between national competent authorities within the Member States.

1.3 These measures must be backed up by close monitoring and enforcement of sanctions by the

Commission, where this is permitted under the Community acquis.

1.4 The EESC recommends that Member States be urged to apply a due diligence process without

specific duration restrictions and adapted to the high-risk profile of applicants, i.e. enhanced due

diligence standards as detailed in the Fifth Anti-Money Laundering Directive2. This should

include any benefactor when applicants are given the possibility of relying on third parties to

make their investment.

1.5 The EESC recommends that the Commission establish a coordination mechanism that allows

Member States to exchange information on successful and rejected applications for citizenship

and residence permits. This could take the form of interconnected central registers containing

information on the due diligence process under which an application has been rejected and the

underlying reasons for such a decision, to discourage shopping around between Member States.

Publication of the reasons for refusal should take into consideration any concerns that security

agencies may have on grounds of public safety or international cooperation between agencies.

1.6 The EESC recommends that all agents and intermediaries providing services to applicants be

subject to anti-money-laundering rules as set out in the Fifth Anti-Money Laundering Directive.

1.7 The EESC further recommends that the EU encourages all agents providing services to applicants

to be accredited and subject to a code of conduct establishing minimum criteria and requirements

1

http://www.europarl.europa.eu/cmsdata/162244/P8_TA-PROV(2019)0240.pdf.

2 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 4/11

harmonised at EU level, so that agents failing to prepare rigorous and reliable documentation for

acceptance can be sanctioned and, if they do so more than once, lose their licence/accreditation.

1.8 While the EESC recognises that public authorities may need to hire specialist agencies to conduct

the necessary checks, it insists that authorities should nevertheless maintain primary responsibility

for accepting or rejecting applicants. Authorities must also maintain a set of measures to avoid

conflicts of interest or bribery risks. In particular, specialist agencies should be selected according

to robust contracting principles that prioritise high quality service over delivery cost and be barred

from marketing the schemes or providing additional services to applicants, and their remuneration

must not depend on the outcome of the applications.

1.9 It is also critical that any enhanced due diligence report that identifies risks should be discussed

with the relevant public agency to ensure that all Member States concerned have a comprehensive

picture of the type and level of risk at hand and fully understand how the sources and research

techniques applied by the specialist agency adhere to best practice principles. Adequate notes and

documents relating to decisions should be kept for as long as the statute of limitations on

falsification of documents and bribery offences allows.

1.10 Member States should ensure that programmes operate with strong governance and oversight

mechanisms and are subject to public scrutiny. Citizens should be informed of the objectives,

risks and benefits that come with CBI and RBI schemes. The EESC stresses the importance of

CBI and RBI applicants' information being publicly accessible, and calls on the Commission to

encourage Member States systematically collect and publish information on the schemes in open-

data format, and on a harmonised and comparable basis.

1.11 The EESC believes it is important that Member States conduct regular impact assessments and

make adjustments as necessary, that they exercise independent oversight over the schemes, and

that they conduct regular audits and publish the results in accordance with applicable legislation.

1.12 Member States should further provide for robust whistleblowing mechanisms for staff and

citizens to report concerns and wrongdoing, and should build in mechanisms for revoking

citizenship and residency rights in the event of new evidence of corruption or criminality being

uncovered. Any decision concerning deprivation of citizenship should be made in accordance

with national and EU legislation.

2. Background and gist of the Commission report

2.1 Nationality is a bond between a citizen and the state. Citizenship of a country is traditionally based

on birthright acquisition, be it by descent (jus sanguinis) or by birth in the territory (jus soli).

States can also grant citizenship to persons fulfilling certain requirements or who can demonstrate

a genuine connection to the country (naturalisation). This includes the requirement to acquire and

maintain a permanent residence in the relevant Member State, as a manifestation of the applicant's

intention to transfer some of their interests to the Member State in question.

2.2 In recent decades, a large number of EU Member States have set up CBI and RBI schemes which

aim to attract investment in exchange for citizenship or residence rights in the country concerned.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 5/11

2.3 In a Resolution of 16 January 20143, the European Parliament expressed concern that national

schemes involving the "direct or indirect outright sale" of EU citizenship undermined the very

concept of EU citizenship. In a debate on 30 May 2018, the European Parliament discussed a

range of risks associated with CBI and RBI schemes4. The issue was further discussed in the

Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) of the

European Parliament. TAX3's final report5 sets out a number of key mitigation measures to reduce

the risks posed by CBI and RBI schemes, including a call on Member States to phase out all

existing schemes as soon as possible. Until the schemes are definitively repealed, the report calls

on the Commission to rigorously monitor the implementation of customer due diligence on

applicants and to ensure better data collection and coordinate information exchange among

Member States.

2.4 On 23 January 2019, the Commission issued a report6 that examines the relevant national legal

frameworks and practices and describes the main risks, challenges and concerns related to these

schemes.

2.5 The Commission's report explains that the schemes pose risks in respect of security, money

laundering, tax evasion and circumvention of EU rules. Those risks, according to the report, are

further exacerbated by the lack of transparency in how some of the schemes operate and a lack of

cooperation between Member States. The Commission has committed to further monitoring CBI

and RBI schemes for their compliance with EU law and to taking action when necessary. With a

view to improving this process, and in order to identify specific measures to tackle the challenges

stemming from the schemes, the Commission has set up a group of experts that already met twice

this year to look at the risks arising from investor citizenship schemes and to define mitigation

measures.

2.6 Most of these schemes were introduced in the aftermath of the 2007 financial crisis. A number of

European countries hit hard by the crisis may have seen it as an opportunity to economic recovery.

In the context of competition between countries to attract foreign direct investment, this might

have encouraged different standards and requirements.

3. General comments

3.1 Risks and threats for the EU

3.1.1 The EESC welcomes the Commission's report, which provides a robust analysis and clear

articulation of the different types of risks posed by these schemes for all EU citizens and the EU

as a whole. In particular, it shows that CBI and RBI schemes, if not implemented appropriately,

3

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2014-0038+0+DOC+XML+V0//EN.

4 http://www.europarl.europa.eu/doceo/document/CRE-8-2018-05-30-ITM-019_EN.html?redirect.

5 http://www.europarl.europa.eu/cmsdata/162244/P8_TA-PROV(2019)0240.pdf.

6 https://ec.europa.eu/info/sites/info/files/com_2019_12_final_report.pdf.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 6/11

may carry inherent corruption, money laundering, security and tax evasion risks, exposing both

the individual Member States that operate such programmes and the entire EU to these threats.

3.1.2 The EESC considers that questions might arise about the compliance of some of these schemes

with EU principles and objectives, including the principle of sincere cooperation.

3.2 No distinction between CBI and RBI schemes

3.2.1 The EESC agrees that no distinction should be made in the way risks posed by CBI and RBI

schemes are addressed.

3.2.2 Although the consequences of being granted a passport or a visa differ significantly in terms of

the rights they grant, both types of scheme bear the same level of security risk and should therefore

be accompanied by mitigation measures of a similarly high standard. This is especially important

in order to prevent displacement from citizenship to residency schemes by the riskiest candidates.

3.2.3 While RBI schemes may appear less risky because of their temporary nature, they also work as a

gateway to permanent status. In some countries, the people granted investor's residence visas can

apply for permanent residence or citizenship after only a few years.

3.3 Money laundering and corruption risks

3.3.1 The Commission's report highlights how risk-taking coupled with inadequate security and due

diligence checks on applicants could open the EU's door to corrupt individuals.

3.3.2 The Commission's report underpins a number of potential loopholes and grey areas with respect

to security and due diligence checks. In particular, it raises concerns related to the processing of

citizenship applications by national authorities and the way this interacts with EU rules.

3.3.3 The EESC notes that in general, despite the high risk profile of applicants, enhanced due diligence

checks are not systematically applied. Moreover, dependants or third-party sponsors providing

funds to support the applicant are not systematically subject to strict due diligence checks and

controls.

3.3.4 The EESC understands that one of the main selling points of these programmes is to offer a fast

track to citizenship or residence, sometimes within a few months. It is usual to see this explicitly

advertised. However, the profile and the origin of applicants will often make it difficult to carry

out adequate due diligence and security checks and conduct reliable business intelligence reports

within the time limit.

3.3.5 Lack of minimum standards indicate that not all Member States are equally selective, raising

doubts about the strictness of checks and controls conducted on them.

3.3.6 Some Member States running RBI schemes do not seem to have a process in place for proactively

addressing security concerns, which may only emerge after residence is granted.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 7/11

3.3.7 The EESC further underlines the significant risk of circumvention of EU anti-money-laundering

rules, given that the intermediaries and bodies through which the funds paid by applicants are

channelled do not qualify as obliged entities under the Fourth and Fifth Anti-Money Laundering

Directives. Moreover, not all Member States require the investment to be made through a national

bank subject to EU anti-money-laundering obligations, and in cases where payments are made in

cash directly to governmental organisations the transfers are not covered by EU anti-money-

laundering legislation either.

3.4 Governance and transparency gaps

3.4.1 The EESC is worried that insufficient accountability and limited transparency in CBI and RBI

schemes could also give rise to corruption. The lack of transparency and integrity also exposes

the state itself and public officials to corruption risks. Structural weaknesses of CBI and RBI

schemes may include: high discretionary power in decision-making, a lack of proper independent

oversight, and risk of conflict of interests of private agents and intermediaries involved in both

the application and due diligence process.

3.4.2 The EESC is particularly concerned that such structural weaknesses and opacity in a sector

generating high cash flow and dealing with customers of high net worth risk may expose

governments to undue influence, abuse of power, and bribery. In short, these schemes not only

create a risk of corrupt individuals entering Member States, but also of authorities themselves

becoming corrupted.

3.4.3 The EESC understands that in some jurisdictions public authorities undertake due diligence

themselves, while in others they may hire specialist agencies to conduct the checks that will then

be factored into the final decision. It further notes that in any case governments must maintain

primary responsibility for accepting or rejecting applications, using due diligence findings to

inform their decision. In cases where this key step in the application process is handed over to

specialist agencies, the EESC warns against possible risks of conflict of interest and bribery and

believes that it should not be allowed for such agencies to be contracted by the state to perform

due diligence checks on applicants while at the same time providing services and advice to

applicants.

3.4.4 The EESC would like to see more official figures available indicating the magnitude of the

phenomenon (size of investments, number of applicants, beneficiaries, nationalities, amount and

impact of the investment, etc.) and regrets that, despite increasing public interest, even basic

information about applicants for CBI and RBI schemes and their investments is still shrouded in

secrecy.

3.5 The EU dimension

3.5.1 The Commission report highlights the EU dimension of the problem. Not only is the EU used as

a key selling point to attract investors, but a decision made by a Member State to grant a passport

or a visa may also adversely affect other Member States and the EU as a whole since such a

decision grants access to the whole Schengen area and internal market.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 8/11

3.5.2 The EESC agrees that the reputation of EU citizenship, as well as the common body of rights and

values, is at risk and reiterates the Parliament's position and the words of a former Commissioner7

that "EU citizenship should not be for sale".

3.5.3 Consequently, the conferral of citizenship and residency – its benefits, ethical implications and

risks – affects all EU citizens. The EESC notes that despite this, EU citizens remain in the dark

about how these schemes work, how their national governments may or may not be mitigating

the inevitable risks of CBI and RBI schemes, and where the investments made under these

schemes are ultimately going.

3.5.4 The EESC recognises that the lack of harmonised standards and practices at EU level may

encourage a race to the bottom in terms of due diligence standards and transparency, and

"passport-shopping" by risky individuals between jurisdictions. The Commission report

highlights that this risk is further increased by the current lack of consultation and information

exchange between Member States on CBI applicants for investor citizenship. In practice, this

means that an application rejected in one Member State on security and money laundering

grounds has a chance of succeeding in another Member State. The EESC therefore thinks it would

useful for Member States to introduce a requirement to submit a valid Schengen visa as part of

the investor citizenship application.

3.5.5 The EESC considers that although the way in which CBI and RBI schemes operate varies from

country to country, a case-by-case approach targeted at specific problems identified in individual

countries will not suffice and a coordinated approach at EU level is needed to address the issue.

3.6 Tax evasion and other types of risk

3.6.1 As the European Parliament8 and the Organisation for Economic Co-operation and Development

(OECD)9 have recently detailed, CBI and RBI schemes could potentially be misused for tax

evasion purposes, as they allow investors to remain tax residents in their home jurisdiction while

benefiting from the tax advantages of CBI and RBI schemes.

3.6.2 The schemes offering access to special tax regimes have been identified as particularly risky and

likely to lead to tax evasion. In particular, they make it possible for individuals to circumvent

reporting under the Common Reporting Standard (CRS). The OECD has included two EU

Member States on its list of jurisdictions offering CBI/RBI schemes that potentially pose a high

risk to the integrity of the CRS10.

3.6.3 The European Parliament study referred to in points 2.3 and 3.6.1 above highlights other types of

risks posed by CBI and RBI schemes, such as macroeconomic risks due to the volatility of this

kind of investment flow, socioeconomic risks resulting from price inflation on the property

7

https://europa.eu/rapid/press-release_SPEECH-14-18_en.htm.

8 http://www.europarl.europa.eu/RegData/etudes/STUD/2018/627128/EPRS_STU(2018)627128_EN.pdf.

9 https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/residence-citizenship-by-investment.

10 http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/residence-citizenship-by-investment.

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 9/11

market, or political risks, including the risk of deteriorating trust in EU institutions and damaging

the reputation of EU citizenship and thus potentially jeopardising EU citizens' mobility and

freedom of movement in the future. It further highlights the risks of increasing discrimination

between categories of migrants. It is therefore important that Member States clarify what risks

they are prepared to take in light of the expected benefits and impact, and that they perform regular

impact assessments to ensure that the benefits outweigh those risks.

4. Specific comments

4.1 Role of the private sector

4.1.1 When assessing the role of private companies in the governance of CBI and RBI the EESC

recognises the existence of two distinct types of company. The first are companies contracted by

the state to manage the programme, process applications, and screen applicants, and the second

are companies that provide services to investors and help them apply for the programme, whether

they are accredited or not.

4.1.2 While the EESC recognises that private companies contracted by the state can play a useful role

in conducting due diligence on applicants, carrying out necessary background checks and

compiling business intelligence reports, it warns against tasking these firms with risk assessment

or decision-making. The EESC insists that this responsibility should lie with the relevant public

authorities.

4.1.3 The EESC is very worried about the promotion of EU rights and EU citizenship as a product for

sale. It is also extremely concerned about the existence of a conflict of interest when firms

contracted to screen applicants are also carrying out related commercial activities or providing

additional services to potential investors.

4.1.4 Regarding private agents and companies providing services to investors applying for CBI and

RBI schemes, the EESC laments the fact that despite the risk profile of their desired clients the

firms and individuals who work in the CBI/RBI industry are neither systematically subject to

statutory regulation nor considered obliged entities under anti-money-laundering rules.

4.1.5 In addition, the EESC understands that not all Member States providing services to applicants

require accreditation and/or licensing of intermediaries, i.e. the obligation to pass a "fit and

proper" test and abide by a set of minimum accreditation criteria including confirmation that

intermediaries are regulated professionals, disclosure of their beneficial ownership information

and a declaration of interests. The EESC would therefore welcome the introduction of an

obligatory code of conduct, supervision of regulated professionals by a competent Member State

body, and provision of information regarding regulated professionals via a publicly accessible

Registry of Service Providers.

4.2 The external dimension

4.2.1 The EESC is concerned about the risks posed to the EU by CBI and RBI schemes put in place by

third countries with which the EU has visa-free agreements, such as the accession countries,

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 10/11

Eastern Partnership countries and Caribbean and Pacific countries. We support the Commission's

recommendation to make the granting of visa-free status to third countries conditional on the

highest possible standards of implementation of CBI and RBI schemes and to review existing

visa-free regimes in light of such standards.

4.2.2 The EESC recommends that while working towards a phase-out of existing schemes in the EU,

accession countries should not be allowed to run CBI or RBI schemes when they join, so that no

new schemes are added to the ones currently in place.

Brussels, 15 October 2019

Christa Schweng

The president of the Section for Employment, Social Affairs and Citizenship

*

* *

N.B.: Appendix overleaf

SOC/618 – EESC-2019-01674-00-00-AS-TRA (EN) 11/11

APPENDIX to the OPINION

of the

European Economic and Social Committee

The following amendment, which received at least a quarter of the votes cast, was rejected in the

course of the debate (Rule 43 (2) of the Rules of Procedure):

Point 1.1

Amend as follows:

1.1 The EESC notes echoes the European Parliament's call in a recent report11 to phase

out all investor schemes, and urges the Member States to reflect on follow this recommendation

on the basis of or provide reasonable arguments and evidence in compliance with EU law and

the laws of each Member State, for not doing so whilst recognising the sovereignty of each

Member State and the application of the EU principle of subsidiarity.

Reason

To be given orally.

Outcome of the vote:

In favour: 17

Against: 45

Abstentions: 5

_____________

11

http://www.europarl.europa.eu/cmsdata/162244/P8_TA-PROV(2019)0240.pdf.